The main difference between buying a house and buying a flat is that when buying a house, you will normally purchase the Freehold, which means you own the land and the buildings on the land for an unlimited time. When buying a flat you will normally purchase a Leasehold title, so there will be a landlord and possibly a managing agent as well.
That does not mean that all houses are freehold, so please carefully read the reports sent to you by your Conveyancer. These will tell you about what kind of property you are trying to buy.
It is also possible to buy freehold flats but they can be a problem (please see further information below).
Considerations When Buying a Flat
It is a common misconception that buying a flat is the equivalent of a freehold home. In fact under a leasehold you have only purchased the right to live in the property for a set period of time. The length of time is determined in the lease and is known as the ‘Term’.
The lease itself also dictates the terms under which you occupy the flat. It may state, for example, that you cannot make internal alterations or keep pets, and that you must pay a service charge to the landlord or their agent for maintenance of communal areas, such as the staircases, roof and gardens. Communal areas are not owned by leaseholders but they should have rights to use them. Again the lease will tell you what those rights are.
While the lease contains the rules on occupation, rent and access rights, not all information required to make an informed decision on whether you want to buy the flat is contained in it.
When deciding whether or not to purchase a flat, there are further considerations that you will need to be aware of, such as:
- How much is the rent?
- Who collects the rent and the service charge?
- What are the service charges – how much and what does it pay for?
- Is there going to be any increase in the service charge?
- Is there a managing agent?
- Is there a management company, and do I need to join it?
- Is there a tenants association?
- Who maintains the building and the common parts?
- When were the common parts last decorated, internally and externally?
- Are there any major works required to the building and what are the cost implications for residents?
- Is the rent going to increase year on year?
The up to date answers to the questions above may not be in the lease. If so the landlord/managing agent can confirm the current position by way of a leasehold enquiries pack. The pack should contain all matters concerning the financial commitments to purchasing a flat. The seller usually has to pay a fee to the landlord for this information.
Please also note that landlords/management companies who provide this information are not regulated so there is no time frame for them to adhere to. As such waiting for the leasehold enquiries pack can sometimes delay the time taken to sell/purchase a flat.
If the flat is deemed to be a freehold – so it is a flat and there is no lease – this can be a problem. A lease determines everyone’s rights and responsibilities, such as who should deal with and pay for structural problems or the maintenance of common areas.
Without a lease or some other agreement, no-one knows who should be dealing with this and as such mortgage lenders are unlikely to lend money to buy this type of property. However, freehold flats are rare, but again please carefully read the reports sent to you by your Conveyancer.